• Thu
  • Oct 30, 2014
  • Updated: 10:49pm
PropertyInternational
PROPERTY

Soaring prices prompt BoE warning on 'dangers'

PUBLISHED : Saturday, 03 May, 2014, 4:01am
UPDATED : Saturday, 03 May, 2014, 4:01am
 

A top Bank of England official has delivered the sternest warning to date about surging British house prices, saying it would be "dangerous" to ignore the momentum that is building up in the market.

The BoE would have to decide in coming months whether to cool the recovery, deputy governor Jon Cunliffe said on Thursday.

It was unclear if the market was heading for a soft landing or a major overshoot in prices that ended with a crash, he added.

"It would be dangerous to ignore the momentum that has built up in the UK housing market since the spring of last year," Cunliffe told a banking industry dinner.

Mortgage lender Nationwide said on Thursday that British house prices last month recorded their biggest annual rise since the start of the financial crisis in 2007.

BoE governor Mark Carney and other top officials have previously played down talk of a property bubble, saying transactions remain below the level before the crisis.

The central bank is hoping to avoid having to raise interest rates from their record low of 0.5 per cent as the British economy continues to recover from the financial crisis.

Instead, the bank has pointed to measures it could use to restrain credit.

Cunliffe sits on the bank's Financial Policy Committee (FPC), which can force banks to hold more capital or ask regulators to take other types of action. It is due hold its next meeting in June.

"Whether and how to act further if, following the pause of the last couple of months, momentum continues to build, will be the most challenging judgment the FPC will have to take in the coming months," Cunliffe said.

The committee was formally launched last year to plug a supervisory gap highlighted by the 2007-09 financial crisis.

Cunliffe said the momentum in the housing market was now the "brightest light" on the committee's dashboard.

He also said Britain's banks, most of whose lending is in the form of mortgages, are now better placed to handle a major housing shock, while home loan underwriting standards have been toughened up but it was too early to say if this was working.

Cunliffe said the committee was looking at whether higher property prices actually result in more transactions at higher prices, and whether that in turn leads to higher household debt.

"The FPC's response will depend on the nature of the risks to stability identified," he said.

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3

This article is now closed to comments

dynamco
so what happens here when China's worldwide tax law commences & the Black Money launderers cut and run
bagelbagel
London is not HK with predominantly Chinese money. London is very international with money from India, Middle East, Russia, Europe, US etc.
dynamco
the word used was what happens 'here' ie Hong Kong
as for London at least the UK Govt charges more rates for keeping empty houses
whereas we have 250k of them here ready for the cut and run
 
 
 
 
 

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